Interaction between product strategy selection and the carbon quota allocation policy.

The interaction between the government's carbon reduction policy and a firm's product strategy has not been well studied in the literature. This paper considers the government's two different carbon quota allocation policies for the cap-and-trade scheme and the firm's two product strategies and investigates the interaction between them by establishing a theoretical model and deriving the optimal decisions. This paper first examines the firms' selection of low-carbon products or ordinary product strategies under the government's two carbon quota allocation policies and then studies the government's optimal carbon quota allocation policy for overall social welfare, which is based on the firm's two product strategies. Our analysis reveals that (i) when the government allocates carbon quotas aimed at reducing the firm's total carbon emissions, the firm will choose the low-carbon product strategy. When the government allocates a carbon quota aimed at optimal total social welfare, the firm's decision depends on the impact of total carbon emissions. (ii) To achieve optimal social welfare, the government will formulate different carbon quota allocation policies on the basis of firms' different product strategies.

Impact of cap-and-trade mechanism on investment decision of new electric power system.

Under the background of cap-and-trade mechanisms, this article constructs a game model of the electricity supply chain, which is dominated by electricity generators and followed by electricity sellers, taking into account the situation of electricity generators investing in renewable energy and energy storage under the grandfathering mechanism (GM) and benchmarking mechanism (BM). By comparing the equilibrium solutions in different cases, the research finds that (1) compared with the grandfathering mechanism, the benchmarking mechanism has more investment in renewable energy and higher energy storage quality; (2) in the consumer market, compared with GM, the electricity price and the electricity demand are higher under BM; (3) an increase in the renewable energy preference coefficient or carbon price will lead to an increase in the electricity wholesale price, renewable energy investment, energy storage quality, electricity price, and electricity demand. Further, an increase in the energy storage cost coefficient or renewable energy investment cost coefficient will result in lower electricity wholesale price, renewable energy investment, energy storage quality, electricity price, and electricity demand; and (4) the profit of the generator under GM is higher than that under BM when the total carbon quota is larger, while the profit of the generator under BM is higher than that under GM when the unit carbon quota is larger.

Energy transition: Cap-and-trade and carbon capture and storage for achieving net-zero emissions with sustainable insurance.

This paper introduces an energy transition model featuring a carbon-intensive manufacturer that adopts sustainable insurance, participates in a cap-and-trade scheme, and implements carbon capture and storage (CCS) transit, all aimed at achieving the net-zero carbon emission target. The model utilizes a down-and-out call (DOC) approach to evaluate the manufacturer's equity, considering the bankruptcy risk prior to maturity due to carbon intensity. The equity of the life insurer providing funds is assessed using a capped DOC method to address the capped credit risk from the manufacturer. The findings reveal that increased adoption of CCS transit diminishes manufacturer equity, heightens default risk, and reduces insurer equity, with these effects exacerbated by advanced CCS technology and stringent cap-and-trade caps. Both stringent cap-and-trade schemes and rapid advancements in CCS transit practices, particularly with the use of advanced CCS technology, deviate from the net-zero target. A critical policy implication is the necessity for the precise calibration of cap-and-trade schemes and the pace of CCS transit adoption to ensure alignment with net-zero targets.

Can Cap-and-Trade Be a Regulatory Option to Address Groundwater Depletion and Irrigation Crises in India? Reflections, Issues & Options.

India is a global hotspot for irrigation-induced groundwater withdrawal, leading to widespread lowering of water levels, in turn resulting in disproportionate access to irrigation supplies among farming communities. Efforts to mitigate the situation, however, have fallen short, largely due to technocentric vision (e.g. microirrigation adoption) of the regulatory authorities (RAs), which does little to integrate the vast groundwater-dependent socioecologies with the decision making system. In view of that, we invite the RAs to deliberate upon a cap-and-trade mechanism that proposes to mobilize the farmers at every aspect of planning and execution, while to tackling multiple challenges simultaneously: (a) restrict groundwater pumping to a pre-defined safe level (cap), (b) creating a shared space/quotas for all to pump (allocation); and (c) making provisions for trade of allocations. The latter further augments farmers' access to groundwater (and irrigation). Using a systematic bibliometric analysis of relevant world literature and contextual appraisal of groundwater-irrigation landscape in India, we develop a conceptual framework of cap-and-trade in three parts. In the first Pre-implementation stage, we emphasize a reality check study to assess ground conditions, if favorable for a cap-and-trade approach (existing social, economic, institutional circumstances). Next, in the Implementation stage, (1) we recommend an integrated hydrogeological-hydrometeorological modeling to determine flexible capping arrangements, with the possibility of delineating certain priority regions (coastal ecosystems); (2) for allocations, a reasonable fraction of the cap over a defined period; we envision a thoroughly participatory arrangement, centering on four action areas: identifying, informing, consulting, and involving the farmers, alongside all stakeholders engaged in the groundwater-irrigation decision making; (3) for trade, we urge the RAs to create win-win situations for both the sellers and buyers; develop the transaction protocols on certain foundational principles (e.g. simplicity, transparency and consistency); strengthening of local institutions, and development of targeted financial support schemes. We consider the third part of the narrative, Post-implementation stage, as a real game changer, comprising of a monitoring, auditing (performance benchmarking) component coupled with multitiered outreach-mentoring drives that demonstrate to the farmers the benefits of becoming part of the cap-and-trade program. Overall, a main motivation to present this research is to shatter the age-old socio-cognitive beliefs/taboos around groundwater pumping (My land, My Water), breaking the hegemony of the water sellers (rich/wealthy large landholder clans), to potentially, create a social norm whereby the farmers realize the value of restricting groundwater pumping and sharing for mutual prosperity.

Developing trust among players in a vendor-managed inventory model for random demand under environmental impact.

Retailers play a vital role in supply chain management because they deal directly with consumers. Occasionally, retailers may cover the entire system's statistics and not disclose these data to the manufacturer. Therefore, asymmetry is generated in the data throughout the system. The main motive of this research was to prevent unreliability throughout the system using a vendor-managed inventory policy. This research shows that by applying a cap and trade policy, the total carbon emitted from the production and transportation sectors can be controlled in the atmosphere. Finally, numerical and sensitivity analyses, along with pictorial representations of various parameters, are performed to examine the optimal results of this study. In addition, the retailer's lead time demand for items is assumed to be random rather than fixed and follows uniform and normal distribution functions. Under these two distribution functions, the optimal retailer lot size, service provided by the retailer to customers, and retailer reorder points are assessed. Furthermore, an evaluation of the total carbon released from an environmental viewpoint is illustrated using numerical findings. The numerical results show that this research is 50.24% more economically beneficial than the methods used in previous studies, whereas the mean value of demand follows a uniform distribution.

A game-theoretic approach to designing carbon regulations in a duopoly freight transportation market: Road and multimodal road-rail competitive systems.

Since the transportation industry produces remarkable carbon emissions worldwide, governments aim to curb these emissions by implementing different carbon regulations. However, little is known regarding how the heterogeneity of transportation systems should be exploited to design carbon regulations. To fill this research gap, the present article formulates carbon cap-and-trade and carbon offset regulations to reduce total carbon emissions produced by road and multimodal road-rail freight transportation systems (FTSs) in a duopoly market; the latter is regarded as a green, energy-efficient transportation mode. A novel procedure is suggested to allocate initial carbon caps that is a hybrid of both benchmark and grandfathering methods. The procedure allows the government to exploit the energy efficiency of the multimodal system, when targeting a reduction of total carbon. Then, a game-theoretic approach is adopted to implement the mentioned carbon regulations. A government, as a Stackelberg leader, maximizes a social welfare function containing economic, social, and environmental dimensions. Under the cap-and-trade regulation, a Nash bargaining process is proposed to trade carbon permits between the FTSs, as the followers, for updating their initial caps. The equilibrium outputs of the two mentioned carbon regulations and a carbon tax regulation are compared. The findings based on an experimental analysis suggest that the cap-and-trade (carbon offset) is the optimal and energy-efficient regulation from the social (economic or environmental) perspective. In terms of policy implications, our findings indicate that the development of a marketplace infrastructure for trading carbon permits is not justifiable under the economic and environmental perspectives of the government.

Promoting Cross-Regional Integration of Maritime Emission Management: A Euro-American Linkage of Carbon Markets.

Reducing greenhouse gas emissions from maritime transport is an urgent topic. Some regional emissions trading systems (ETSs), buoyed by the globalized market-based measures (MBMs) plan of the International maritime organization, have initially assessed the feasibility of including maritime emissions under compliance obligations. However, including maritime emissions (which are interjurisdictional) in the existing ETSs is controversial, and globalized maritime MBMs remain elusive. Therefore, this study designed a joint bilateral maritime carbon market (BMCM) model based on the European ETS (EU-ETS) and Quebec ETS (QC-ETS). The carbon costs, speed optimization, and marginal abatement costs of three container routes under BMCM were analyzed. The results show that this Euro-American linkage achieves adequate emission coverage on specific routes and generates acceptable carbon costs for charterers. This study yields a positive result for the equal division of ETSs' exercising competence in cross-regional maritime transport and provides evidence for sector-specific ETS links based on quantitative analysis.

A novel multi-objective robust fuzzy stochastic programming model for sustainable agri-food supply chain: case study from an emerging economy.

On the one hand, supply chain management of agri-food products under uncertain conditions has a significant impact on food security and, on the other hand, increases the profits of supply chain components. Moreover, considering the sustainability concepts leads to more social and environmental benefits. The present study investigates the canned food supply chain under uncertain conditions and sustainability concepts by considering strategic and operational decisions and different characteristics. The proposed model is a multi-echelon, multi-period, multi-product, multi-objective location-inventory-routing problem (LIRP) in which the vehicle fleet is considered heterogeneously. The objectives of this model are to (1) minimize costs, (2) minimize customer dissatisfaction, (3) maximize production throughput, and (4) maximize job opportunities. In this study, carbon cap and trade mechanism are used to minimize environmental damage. Robust fuzzy stochastic programming (RFSP) is employed to cope and control uncertainties. The multi-objective optimization problem is implemented on a real case and solved using the Torabi and Hassini (TH) method. The results of this study showed that with increasing confidence levels, the severity of the problem increased and the values of the objective functions worsened. Also, using the relative value of stochastic solution (RVSS) criterion demonstrated that the effect of utilizing the RFSP approach on the first and second objective functions was higher than that the nominal approach showed itself. Finally, sensitivity analysis is performed on two parameters: the selling price of products to foreign customers and the cost of purchasing products from farms. The results of this study showed that changing these two parameters had a significant effect on the first and second objective functions.

Effects of China's low-carbon policy under stochastic shocks-a multi-agent DSGE model analysis.

China has announced a target of achieving carbon peaking by 2030 and carbon neutrality by 2060. Therefore, it is important to assess the economic impacts and emission reduction effects of China's low-carbon policies. In this paper, a multi-agent dynamic stochastic general equilibrium (DSGE) model is established. We analyze the effects of carbon tax and carbon cap-and-trade policies under both deterministic and stochastic conditions, as well as their ability to cope with stochastic shocks. We found that (1) from a deterministic perspective, these two policies have the same effect. Every 1% cut in CO2 emissions will bring a 0.12% output loss, a 0.5% drop in demand for fossil fuels, and a 0.05% rise in demand for renewable energy; (2) from a stochastic perspective, effects of these two policies are different. This is mainly because economic uncertainty does not change the cost of CO2 emissions under a carbon tax policy, but it does change the price of CO2 quotas and the emission reduction behaviors under a carbon cap-and-trade policy; (3) from an economic volatility perspective, both two policies can act as automatic stabilizers. Compared to a carbon tax, a cap-and-trade policy can better ease economic fluctuations. The results of this study provide implications for policy-making.

Study of Carbon Reduction and Marketing Decisions with the Envisioning of a Favorable Event under Cap-and-Trade Regulation.

To achieve SDGs (sustainable development goals) and carbon neutrality goals, the Chinese government have been adopting the cap-and-trade regulation to curb carbon emissions. With this background, members in the supply chain should properly arrange their carbon reduction and marketing decisions to acquire optimal profits, especially when the favorable event may happen, which tends to elevate goodwill and the market demand. However, the event may not be of their benefit when the cap-and-trade regulation is conducted, since the increase in market demand is always associated with an increase in carbon emissions. Hence, questions arise about how the members adjust their carbon reduction and marketing decisions while envisioning the favorable event under the cap-and-trade regulation. Given the fact that the event occurs randomly during the planning period, we use the Markov random process to depict the event and use differential game methodology to dynamically study this issue. After solving and analyzing the model, we acquire the following conclusions: (1) the occurrence of the favorable event splits the whole planning period into two regimes and the supply chain members should make optimal decisions in each regime to maximize the overall profits. (2) The potential favorable event will elevate the marketing and carbon reduction efforts, as well as the goodwill level before the event. (3) If the unit emissions value is relatively low, the favorable event will help to decrease the emissions quantity. However, if the unit emissions value is relatively large, then the favorable event will help to increase the emissions quantity.

Pricing and Quantity Decisions under Asymmetric Carbon Emission Reduction Information and Cap-and-Trade Mechanism.

With the continuous spread of cap-and-trade mechanisms and consumers' great concerns about environmental issues, manufacturers strive to reduce carbon emissions. Unfortunately, they are not always willing to disclose their accurate emission reductions or may even falsify emission reduction information. By developing a signaling model, we explore the impact of the cap-and-trade mechanism and asymmetric information on the decision-making of supply chain members composed of a manufacturer regulated by the cap-and-trade mechanism, and a retailer. As a result, we show that the low-type manufacturer has the incentive to mimic the pricing behavior of the high-type manufacturer under information asymmetry. Thus, in order to avoid this mimicry, the high-type manufacturer will distort the wholesale price. Moreover, the impact of the cap-and-trade mechanism on the manufacturer depends on the initial quotas. Only when the initial quota is in the middle range does the high-type manufacturer benefit, while the low-type manufacturer suffers. Furthermore, the low-type manufacturer tends to hide emission reduction information, while the high-type manufacturer tends to disclose the information. We also address how information asymmetry weakens the emission reduction advantages of the high-type manufacturer. However, the cap-and-trade mechanism can effectively alleviate this negative effect.

Optimal ordering and production decisions for remanufacturing firms with carbon options under demand uncertainty.

We study the role of carbon options in mitigating the risk of demand uncertainty for an emissions-dependent firm that conducts remanufacturing and then selling to consumers. Specifically, we first investigate the carbon option-void scenario as a benchmark where no carbon options are available under demand uncertainty in the emission trading market. Subsequently, the unidirectional carbon option scenario and the bidirectional carbon option scenario are introduced as alternatives to purchase carbon emission quotas. Through comparing the optimal ordering and production decisions under different scenarios, we demonstrate the positive role of carbon option contracts in improving the firm's profits and, more importantly, coping with demand uncertainty. Among other results, we observe that the bidirectional carbon option contracts perform better than the unidirectional carbon option contracts. Under the two option-based scenarios, the firm is more sensitive to the carbon option price than the exercised price. In addition, the firm has incentives to remanufacture with a relatively high remanufacturing rate and a loose carbon emission policy.

How carbon trading policy should be integrated with carbon tax policy-laboratory evidence from a model of the current state of carbon pricing policy in China.

China is planning to introduce carbon tax policy to control the carbon emissions of the country better and achieve the "3060 goals", but there is still widespread discussion about how to introduce it and how to combine it with cap and trade. China has already established a national carbon emission trading market; however, there is also disagreement on whether to impose the carbon tax on companies and projects that have been included in scope of cap and trade. This paper adopts the research method of experimental economics to study the effect on social economy and social emission reduction under cap and trade, carbon tax, and carbon tax-carbon trading policies, and analyzes average prices of carbon market under cap and trade and carbon tax-carbon trading policies. The study finds that under the carbon tax-carbon trading policy, carbon emissions cannot be reduced significantly; but the profits of manufacturers will be reduced significantly; meanwhile, this reduction effect is even more severe for high consumption manufacturers; and it will be resulting in a lower average carbon market price under the carbon tax-carbon trading policies than under the cap and trade policy. This paper will provide theoretical suggestions for introducing carbon tax policy into China in the future and make policy recommendations for the better development of China's carbon market.

Low-Carbon Transition Models of High Carbon Supply Chains under the Mixed Carbon Cap-and-Trade and Carbon Tax Policy in the Carbon Neutrality Era.

To achieve the goals of carbon peak and carbon neutrality, the low-carbon transformation (LCT) of high-carbon firms is inevitable. We construct game models of a supply chain with different dominant types under a mixed carbon policy that embraces carbon cap-and-trade and carbon tax. Solving each dominant model, we derive the effective area and optimal threshold of the mixed carbon policy to guide LCT. We find that the selling price, market demand, and profit of the supply chain system are equal in different dominant models due to the mixed carbon policy, but when a company dominates the supply chain, its profit is higher than when it is a subordinate. In addition, the high-carbon manufacturers (HCM) will pursue LCT only when the sum of the carbon tax rates and carbon trading prices is within a certain threshold, and the subordinate HCM are more likely to be driven to pursue LCT. Therefore, the government should adopt a differentiated hybrid carbon policy, setting a high (low) carbon tax rate for the HCM in a dominant (subordinate) position.

Optimal Carbon Abatement Strategy for Manufacturers under Cap-and-Trade.

Carbon emission abatement is very important for manufacturers regulated by environmental policies. However, choosing an optimal carbon abatement strategy is difficult for many firms. This paper attempts to explore the appropriate carbon abatement strategy for firms that are regulated by cap-and-trade. Specifically, by bringing remanufacturing into consideration, this paper examines a manufacturer that has four alternative carbon abatement strategies: (1) do nothing, (2) invest in carbon abatement, (3) engage in remanufacturing, or (4) become involved in investment and remanufacturing together. The models of these four strategies are first developed in a monopolistic operating environment. The results show that among the four carbon abatement strategies, although the fourth strategy has the highest costs, it generates the largest profits for the manufacturer, passes the greatest benefits along to consumers, and has the best environmental performance. Next, this study is extended to a competitive environment. The results show that the optimal strategy in the monopolistic environment no longer maximizes profits, and decision guidance is offered for the manufacturer operating under such an environment.

Manufacturer's Encroachment and Carbon Emission Reduction Decisions Considering Cap-and-Trade Regulation and Consumers' Low-Carbon Preference.

Carbon emission reduction and achieving carbon neutrality has become an inevitable trend in the sustainable development era. We investigate the manufacturer's encroachment and carbon emission reduction decisions considering government cap-and-trade regulations and consumers' low-carbon preference. The equilibrium decisions for the four scenarios are analytically obtained and compared based using the Stackelberg game. A comparison with and without cap-and-trade regulation under two encroachment decisions regarding member's profits and carbon emission reduction levels are conducted. It is shown that the encroachment decision is always advantageous for the manufacturer if the government decides not to implement cap-and-trade regulation, and the retailer always loses profit. Moreover, if the carbon quota is sufficient, cap-and-trade regulation benefits the manufacturer. Otherwise, the manufacturer's encroachment decision depends on the appropriate initial unit amount of carbon emission and unit carbon price. The retailer's profit may not always be hurt by the manufacturer's encroachment with cap-and-trade regulation; unless the unit carbon price exceeds a certain threshold, a higher consumer's low-carbon preference in the encroachment scenario reduces more carbon emissions than in the no-encroachment scenario for the manufacturer. Further, the rising platform commission rate causes the platform profit to increase first and then decrease; the platform profit will slightly decrease if both products become more substitutes.

Retailer-driven carbon emission reduction: contract design in the presence of information asymmetry and cap-and-trade.

This study considers a supply chain consisting of a dominant brand-name retailer and a manufacturer in the presence of a cap-and-trade mechanism and consumers' low-carbon preference. The retailer exerts advertising efforts, while lacks of the manufacturer's private carbon emission reduction effort cost information. We construct the benchmark model with information symmetry and asymmetry respectively. We obtain all members' equilibrium solutions and analytically examine the impact of the manufacturer's carbon emission reduction effort cost, the retailer's advertising effort cost, and consumers' low-carbon preference on the supply chain members' decisions. And then, we systematically compare two scenarios to obtain the condition in which the manufacturer would be willing to share the private information. With the aim of improving the manufacturer's carbon emission reduction effort level and all members' economic performance, we further propose a two-part tariff contract for information symmetry and asymmetry, respectively.

Carbon emission reduction cooperation of three-echelon supply chain under consumer environmental awareness and cap-and-trade regulation.

Considering that both the manufacturer's production process and the transporter's freight process produce carbon emissions, this paper constructed a three-echelon supply chain composed of a manufacturer, a transporter, and a retailer. This article studies the cooperative carbon emission reduction among the supply chain members under the carbon cap-and-trade policy and consumer environmental awareness. We used the Stackelberg game to explore four scenarios as follows: (1) in the non-cooperative decision model, no cooperation takes place among all supply chain members; (2) in the local cooperation decision of the manufacturer and the transporter alliance model, the manufacturer and the transporter work together to make decisions reducing carbon emissions, but each member of the supply chain makes its own pricing decisions; (3) in the local cooperation decision of the retailer-transporter alliance model, there is no cooperation except that the retailer and the transporter cooperate with each other to determine the selling price of the product; and (4) in the overall-cooperative decision model, there is complete cooperation among the members of the supply chain, who collectively decide on carbon emission reduction and the selling price of the product. Then, using the backward induction method, we derived and compared the equilibrium solutions and the profits of the supply chain system. The results showed that the scenario of complete cooperation among all supply chain members had the best performance in carbon emission reduction, market equilibrium quantity, and the supply chain system's profit, but the selling price of the product was likely to be higher than other scenarios. Two contracts have been proposed to coordinate the supply chain system. The cost-sharing contract is effective but imperfect under limited constraints. The two-part tariff contract can realize perfect coordination of the supply chain. Finally, we obtained several interesting conclusions from the numerical example and provide managerial insights and policy implications from the analytical results.

Cooperative emission reduction in the supply chain: the value of green marketing under different power structures.

Under environmental policies and consumers' green preferences, firms are facing the problem of how to improve the efficiency of emission reduction (ER) and increase profit. In this paper, we construct an analytical framework that includes a manufacturer and a retailer to explore the value of cooperative ER under the carbon cap-and-trade mechanism (CCTM). The manufacturer invests in green technologies to reduce emissions, and the retailer can choose whether to implement green marketing. We find that cooperative ER can increase the manufacturer's ER level and the profit of the manufacturer and the retailer. In the retailer-led situation, the manufacturer's ER level and the retailer's marketing level are both higher than in the manufacturer-led situation. Moreover, the economic performance of the supply chain (SC) is better. Furthermore, when consumers have a strong green preference, the value of cooperative ER is greater; in addition, the advantage of the retailer-led situation is more obvious. Our work enriches the ER theory and provides guidance for firms to reduce emissions.

Incentive Mechanisms for Carbon Emission Abatement Considering Consumers' Low-Carbon Awareness under Cap-and-Trade Regulation.

In the era of sustainable development, reducing carbon emissions and achieving carbon neutrality are gradually becoming a consensus for our society. This study explores firms' incentive mechanisms for carbon emission abatement in a two-echelon supply chain under cap-and-trade regulation, where consumers exhibit low-carbon awareness. To boost the manufacturer's motivation for abatement, the retailer can provide four incentive strategies, i.e., price-only (PO), cost-sharing (CS), revenue-sharing (RS), and both (cost and revenue) sharing (BS). The equilibrium decisions under the four incentive strategies are obtained by establishing and solving game models. A two-part tariff contract is also proposed to coordinate the low-carbon supply chain. Finally, through comparisons and analyses, we find that: (1) Consumers' high low-carbon awareness can boost the manufacturer's incentive for carbon emission abatement (CEA), thus increasing supply chain members' profits. (2) It is more effective for the retailer to share its revenue to incentivize the manufacturer for abatement than to bear the investment cost of CEA. Thus, Strategy RS is better than Strategy CS and equivalent to Strategy BS. (3) The manufacturer and retailer have consistent incentive strategy preference under cap-and-trade regulation. Both firms prefer the incentive strategy with a higher cooperation level. (4) The incentive strategy with a higher cooperation level can also bring higher eco-social welfare under certain conditions.